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Posted by Larry Doyle on March 9th, 2009 5:40 PM |
On the heels of the Bernie Madoff fiasco, there was massive pressure on the gross incompetence displayed by the SEC. Not unlike a police department that is under fire, the SEC needed a high profile case to gain a measure of vindication. Enter Allen Stanford and Stanford Financial.
I am not here to defend Allen Stanford nor any of the activities that transpired in his offshore bank located in Antigua. However, the SEC also froze the assets of all clients housed in Stanford Financial’s brokerage operation based in Houston. Unlike Bernie Madoff, who did not employ a custodian, the bulk of Stanford Financial’s assets were housed at Pershing Financial, one of the largest custodians in the business. While the concerns revolving around Stanford are in the Caribbean, the SEC’s act of freezing ALL customer accounts has been the death of this brokerage entity. Hundreds of legitimate jobs have been eliminated. Thousands of customers have faced unnecessary and undue financial hardships since February 17th as a result. (more…)
No Justice!! No Confidence!!
Posted by Larry Doyle on March 9th, 2009 10:38 AM |
All indications point to a plea deal this week with Bernie Madoff. In my opinion, Bernie Madoff seems to have been treated with kid gloves to this point. House arrest for a purported crime of this magnitude defies logic. One can only assume the government
Bernie Madoff
utilized this approach, even after Bernie shipped jewels and assets overseas, as they were trying to extract as much information as possible. This week’s news will give the public the first hint as to what kind of information the government has extracted.
My father was an assistant district attorney in Suffolk County, MA and has often made the point that white collar crime never received the degree of justice it deserved. The crime that Bernie and team propagated not only directly impacted his investors but also massively impacted the public at large. How is that? Bernie’s Ponzi scheme, perpetrated over such an extended period of time, has caused a crisis of confidence in our markets, our regulatory system, and ultimately our country.
It defies logic that this Ponzi scheme was not executed without enormous cooperation and involvement by a number of individuals both inside and outside the Madoff organization. There is no doubt in my mind that many of those individuals have information, that if revealed, can and will be extremely embarrassing for some high profile people within our regulatory bodies and our government. (more…)
Fed Releases Names of AIG’s Creditors
Posted by Larry Doyle on March 6th, 2009 9:03 PM |
Under pressure from Congress this week to release the names of AIG’s creditors, the Federal Reserve’s Vice Chairman Donald Kohn clearly got the message. The Fed has acquiesced in releasing that Top U.S., European Banks Got $50 Billion in AIG AID.
My immediate reaction to this news is how interesting that the bulk of these institutions are European. What does that tell me? These European banks were getting plowed by Wall Street with a lot of sub-prime backed CDOs and when the dam was breaking they wanted to hedge their position. Market speculation is that European institutions own twice the amount of toxic assets as U.S. based institutions. That exposure on top of their delinquent loans in eastern Europe is crushing a number of western European banks. Who are they? Start by looking at the list, included in the above-referenced article, of AIG creditors.
In providing the hedge – which is the insurance – AIG received a fat premium but has been paying for it ever since. Actually, AIG only truly paid for it up until last September . . . the American taxpayer has been and will continue to be paying for it for a long time. Where were the regulators when we really needed them?
LD
Loan Sharks Not Welcome Here
Posted by Larry Doyle on March 5th, 2009 3:49 PM |
In the midst of this economic turmoil in which many people are increasingly cash constrained, a cottage industry has developed which preys on the most vulnerable in our society. This industry facilitates short term loans in exchange for the borrower’s paycheck or tax refund.
The companies that participate in this lending should not only be outed but they should also be prosecuted for this activity.
Bloomberg writes how More Americans Turn to Tax Refund Loans to Pay Monthly Bills. With implied rates of interest on these loans from 50% to 500%, this is loan sharking at its worst!! Where are the Better Business Bureau and Attorney Generals when you really need them? (more…)
Could The FDIC Go Broke?
Posted by Larry Doyle on March 5th, 2009 9:45 AM |
In very short order, the FDIC (Federal Deposit Insurance Corporation) has seen its reserves plummet from $50 billion to $18.9 billion at the end of 2008. At that pace and with the expectation of more bank failures, could this bedrock of our national banking system go broke? Well, FDIC’s Bair Says Insurance Fund Could Be Insolvent This Year. Is Sheila Bair unnecessarily sounding warning signals? Am I running to the bank to withdraw my money? No and no.
Sheila Bair is proactively managing expectations for all concerned, those being politicians, regulators, bankers, and consumers. In fact, if she did not highlight the current state of the FDIC reserve fund and expectations for future declines, she would not be fulfilling her obligations. (more…)
Warden Grows Veggies With Prisoners
Posted by Larry Doyle on March 4th, 2009 6:40 PM |
I highlighted back in mid-January the need to Let’s Really Question Ms. Schapiro. Now the chair of the SEC, Ms. Schapiro headed Finra and saw cases filed and fines collected decline by an estimated 35%. I was trying to make the case that Ms. Schapiro was nothing more than a warden growing vegetables in the same garden as the prisoners, given that Finra invested in hedge funds, fund of funds, private equity, and Auction Rate Preferred Securities. These ARPS were a scam perpetrated by Wall Street on clients. The bonds were marketed as cash surrogates with regularly scheduled auctions. When the auctions “failed,” the clients were left holding the bag in the form of the long term securities that ARPS truly are. OUCH!!
There are numerous individual customers still stuck with ARPS. I have spoken with an individual in my hometown, trying to help him publicize his case so that he can be made whole by a major bank that sold him the bonds. (more…)
How Wall Street and Washington Betrayed America!!
Posted by Larry Doyle on March 4th, 2009 11:03 AM |
While politicians, bankers, regulators, and commentators can and will point fingers as to where and how our system of financial oversight broke down, make no mistake it was due to too many people making and taking too much money!! I have highlighted the grotesque system of lobbying that has developed and corrupted our society in More Legalized Bribery.
We watch daily hearings on Capitol Hill in the spirit of doing what is right for our country. Please!! Spare me the nonsense and pandering. While collectively we deal with markets that are now down over 50%, the pols and the bankers have effectively robbed the bank and left the taxpayers with the bill to clean up the mess. Barron’s wrote a brief piece on this topic: how the Financial Sector Spent $5 Billion Lobbying Washington Over the Last Decade!!
It is high time we attach names and faces to those politicians and lobbyists who fed at this trough!!
LD
Mo’ Money…
Posted by Larry Doyle on March 3rd, 2009 2:48 PM |
There are a string of events in the market today that all highlight the need for entities to refinance debt and raise capital. Given the tightness of credit and the onerous terms being exacted within the bond market, many firms are massively capital constrained. These issues are global in nature. From our friends at Bloomberg, I offer the links to a number of these situations. In light of these types of situations, one does not need to be in a hurry to buy stocks. Additionally, given the demands for capital, I still maintain that rates are headed higher.
I will share with you some of the current problem situations getting serious attention:
1. GE Falls Below $7 on Concern Finance Unit May Need More Capital
2. Corporate Bond Losses Drive Investors ‘to the Bunker’
3. Metlife, Lincoln Sink as U.S. Stock Rout Increases Capital Need
4. German Real Estate Firms Owe Billions, Face Deadlines
LD
